OCR A Level geography - Trade in the Contemporary World topic notes
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Paper two: Trade in the Contemporary World
Institution
OCR
This document is a complete set of notes for the Trade in the Contemporary World topic for OCR a level geography.
The notes contain in-depth case studies that have been well-researched and go beyond the information provided by text books.
,TOPIC ONE - WHAT ARE THE CONTEMPORARY PATTERNS OF INTERNATIONAL TRADE
TOPIC ONE A - AN UNDERSTANDING OF THE TERMS MERCHANDISE, SERVICES, AND CAPITAL AS COMPONENTS OF
INTERNATIONAL TRADE
COMMODITY
A raw material or primary agricultural good that can be traded, bought or sold
Most often used as inputs in the production of other goods or services
For example wheat, cattle, oil, natural gas, gold, sugar, cotton, cocoa, coffee
Soft commodities - cannot be stored for long periods of time
TERMS OF TRADE
Terms of trade represent the ratio between a country’s export prices and import prices
Determined by dividing the price of exports by the price of imports and then multiplying the number by 100
Terms of trade less than 100% = more capital leaving the country than entering
Terms of trade more than 100% = a country is accumulating more capital from exports than it is spending on imports. This
can be a positive economic indicator
The least developed countries have weaker terms of trade, often because they have limited access to global markets and
are often still exploited
However, a country isn’t better off the less it imports
For a healthy economy helpful to import low value goods, thus directing most resources into producing high value goods
that can be sold for a high price
MERCHANDISES
International trade of merchandise = all inward and outward movement of goods through a country
Includes primary products (such as agricultural products, mining products, and fuels) and secondary products (such as iron,
chemicals, machinery, and textiles)
There is very high value of merchandise exports in the economies of Europe (US$6430 billion) and Asia (US$5646 Billion)
The value of merchandise exports is much lower in Africa (US$571 Billion). Demonstrating the scale of inequalities between
world regions
- However these figures provide only a snapshot of what is rapidly changing and complex, concealing variations
between countries within the continent and not showing the rates of change
In 2018, the value of merchandise trade was US$19.67 trillion
SERVICES
Commercial services include transport, travel, communications, construction, and finance
It is dominated by more advanced countries, however the global pattern has become increasingly complex especially with
the continued growth of outsourcing and the increasing connectivity of global supply chains
Europe is the largest net exporter of commercial services
Much of this type of trade is intra regional, in particular between the countries of the EU
African countries are overall net importers, mainly through trade with advanced countries and emerging developing
countries
Contrasts in ability to support commercial services depend on factors such as skill and educational levels of the wok force,
government and private investment, and the strength and reliability of financial and legal institutions
CAPITAL
International flows of capital are the result of purchases and sales of real (physical and tangible items such as commodities,
minerals, land, and real estate) and financial (currency, stocks, and bonds) assets across national borders
, The growing interconnectivity of global trade has increased globalisation of capital flows
Most of the flows of capital are between a small number of advanced countries
However the network is widening as a growing number of low income developing countries have become integrated into
the global trade system
Most flows are intra firm, especially within multinational corporations
Goods, materials and semi finished products flow between parent companies and their subsidiaries through global supply
chains
Consequent financial transactions are often completed by accounting within the company
Foreign direct investment
- Type of capital trade
- When an investor becomes a significant or lasting investor in a business or corporation in a foreign country
- This type of investment is key for any country
- FDI is one of the driving forces of economic globalisation
- In 2021 the world total FDI = US$1.6 trillion
CURRENT SPATIAL PATTERNS IN THE DIRECTION AND COMPONENTS OF INTERNATIONAL TRADE
The spatial patterns of resources create the networks of trade and economic interdependence that exist at local, regional,
national and international scale
INTER REGIONAL TRADE
The flow of international trade among major world regions such as Europe, North America and Asia
The EU and USA are the world’s largest trading partners by value of merchandise, services, and capital
In 2014 total trade between them took up 30% of global trade flows
In 2022, the USA received 20% of the EU’s exports (mostly from germany). The EU receives 10% of the USA’s exports
EU - ASEAN (association of southeast asian nations) trade (2011 data)
The EU is ASEAN’s third largest trading partner after China and the US, accounting for around 10.6% of ASEAN trade
The EU is the second largest investor in ASEAN countries
- In 2019, its foreign direct investment stocks into ASEAN accounted for 313.6 billion euros
2020
● EU imports from ASEAN = €120.4 billion
● EU exports to ASEAN = €69.4 billion
2021
● EU imports from ASEAN = €136.3 billion
● EU exports to ASEAN = €79.7 billion
INTRA REGIONAL TRADE
The flow if international trade within one of the major world regions such as Europe and Asia
Most international trade is intra regional
The EU
There is wide variation in the value of exports of goods by member states to partners within the EU
In 2021, the value of export trade in goods ranged from €751 billion for Germany to €0.9 billion for Cyprus
There were nine member states whose exports were over €100 billion in 2020, accounting for 81% of the total value of
intra EU exports of goods
In 2021, within all member states the share of manufactured goods was higher than the share of primary goods
Africa
Intra regional trade is critical for Africa’s development
The progress of economic integration has been slow
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